Giamboni, Luigi and Millemaci, Emanuele and Waldmann, Robert (2007): Evaluating how predictable errors in expected income affect consumption.
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This paper studies whether anomalies in consumption can be explained by a behavioral model in which agents make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. The paper shows that, the null hypothesis of rational expectations is rejected in favor of the behavioral model, since consumption responds to predictable forecast errors. On average agents who we predict are too pessimistic increase consumption after the predictable positive income shock. On average agents who are too optimistic reduce consumption.
|Item Type:||MPRA Paper|
|Original Title:||Evaluating how predictable errors in expected income affect consumption|
|Keywords:||Behavioral Economics; Subjective Expectations; Rational Expectations; Consumption and Saving|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations; Speculations
D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
|Depositing User:||Emanuele Millemaci|
|Date Deposited:||23. Jan 2009 00:27|
|Last Modified:||15. Feb 2013 23:06|
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